Taxation in Austria Will Change in 2016

The Austrian government and parliament approved a general tax reform which will come into force in 2016. While the reform clearly targets mainly domestic tax issues such as tax reduction for low earners and an increased taxation of those earning over 1 mln EUR, it will also affect foreign investors investing into Austrian property.

While the property transfer tax (stamp duty) and land registry fee at property ownership transfer will remain the same, the taxes for sellers of second home properties will increase from 25 to 30% of the capital gain. There is no tax on first home (main residence) sale profit and even the tax on second homes is lower for properties acquired before 2002. It is expected that property prices will growth as sellers will try to share this negative effect with the buyers.

Further changes come in the taxation of rental income. Foreigners as well Austrians often buy apartments in Austrian ski resorts. They use the apartment for a few weeks a year for winter or summer holiday and the rest of the year it is rented out to holiday makers. For foreigners these incomes are usually taxed based on so-called „limited tax duty“. The table below comprares the "limited tax duty" liability in 2015 with that introduced for 2016. It is based on progressive taxation.

Rental Return

2015 tax

2016 tax

First 2000 €

0%

0%

2000 – 9000 €

36,5%

25%

9000 – 22 000 €

36,5%

35%

22 000 – 51 000 €

43,2%

42%

51 000 – 81 000 €

50%

48%

81 000 – 991 000 €

50%

50%

Over 991 000 €

50%

55%

As shown in the table above, for lower rental income the taxes decrease. Realistically, even owners of big luxury apartments earning up to around 50 000 EUR a year (typically an apartment priced at 1 mln EUR earning a 5% annual yield), especially if coowned by a couple or more people, will benefit. Those owning more properties or big alpine chalets usually opt for an ownership through a company.

There will be other smaller changes affecting foreign investors in Austrian property, such as changes an amortisation percentage. Austrian tax system is not always straight forward and we recommend to anyone acquiring a property in Austria to contact a tax advisor who will give a valuable advice. Contact us and we can recommend you one.